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Severe Negative Information in a Credit Report

One of the four main components of credit data in a credit report includes public record information. Public records include items such as bankruptcies, tax liens, legal judgments and other legal proceedings recorded by a court. These records are often the biggest drags on a credit score. Some of these accounts may be able to be cleared up or removed from the credit history or credit report with a little bit of work.

Most of these public records unfortunately, can not be altered or ameliorated. For example; on bankruptcies credit reports simply record the time of the bankruptcy filing and the time of the bankruptcy discharge, there is very little that can be done to improve a credit score based on new or updated information on a bankruptcy. Other accounts may have the possibility of being removed or have the damaging impact on the credit score lessened. A key element in lessening the negative impact of these accounts is removing the record altogether or having the account reflected as being paid in full and satisfied. Understanding how and why the public record is on someone’s credit history in the first place is the key to handling these accounts and clearing up a bad credit report and low credit score.

Judgments

Judgments on a credit report are the result of lawsuit that has been lost and the courts have awarded a judgment against the defending party. The lawsuit could come from a creditor such as credit card that is in default or car loan or private party in which there is a debt of money owed and the payment arrangement is in default with collection continuing to court and the end result being a judgment awarded to the party in which the funds are owed.

If you still owe money on an account that is being reported negatively and if your payment troubles are the result of unexpected job loss, illness or some other event beyond your control rather than overspending or just a casual attitude toward paying the debt, the creditor may be approachable about working with you to improve your credit record as long as it involves some sort of payment.

Generally, creditors will not seek a judgment against a consumer unless they have tried every way possible to get their money. To get a court awarded judgment the defendant must be served notice of the court date and either lose the defense or simply not defend the matter in which case the judgment is referred to as a default judgment. Judgments are time consuming and costly for the creditor to pursue and they are frequently the last cause of action and are generally not pursued on small dollar amounts.

When a judgment is awarded in the creditors favor, such as the credit card company or auto loan, the creditor will often not be very eager to work out a deal with you since they have already won the lawsuit against you. The only way to resolve these situations is to pay the amount owed. It is always best to try and settle the debt, hopefully for a lower amount, before the judgment is awarded even if that means settling right up to the court date. If a creditor has a judgment against you can still try and negotiate a lesser amount to pay.

Creditors may be receptive to this offer because it provides them with money that they have probably given up on, and it helps them recoup some of what they spent trying to collect on the account and getting a judgment. In other words, it is found money for them.

To explore this option, contact the creditor’s account manager and explain the reasons for the problem with your account and offer to resume payments if you had made them in the past, increase the amount of your payments or if possible pay the debt off altogether. Obviously, it is easier to negotiate a lower amount if the account is to be paid all at once.Find out if the credit account manager or debt collector might be willing to settle for less than the full amount owed. Indicate that in exchange for your offer you would like the creditor to stop reporting all negative information on your account to credit bureaus or credit reporting agencies and have a release prepared for the judgment.

If your creditor agrees to vacate the judgment in exchange for payment, be sure to get that agreement committed to paper and signed. Find out if the credit manager is willing to update your credit report to show that the adverse account information is no longer verifiable. Also, ask that a notice be sent to each of the credit reporting agencies the creditor reports to asking that they delete the adverse information from your record. This approach will not work with every creditor but like all debt negotiations, it is certainly worth a try.

Tax Liens

Negotiating a deal with a taxing entity that has placed a lien on your property can be difficult. This is because the taxing entity knows that all it has to do is wait to collect the debt, when the time comes for you to sell your property they will get the money. Government workers also do not have the same incentives as private sector debt collectors for collecting delinquent bills. However it still may be worth the effort to at least attempt to negotiate a deal when there is a lien on your credit record and property.

To initiate negotiations with a taxing entity, contact the appropriate office in your area, tell them what you want to accomplish, explain the cause of the problem and there is nothing wrong with being emotional, then find out whom you need to talk with as well as the paper work you need to complete a settlement request. Should you be denied a compromise, appeal to the next level of decision making within the organizational structure of the taxing authority. Unfortunately, you will be working with a bureaucracy, so answers and assistance may be slow and difficult to obtain.

One final note if you decide to seek a negotiated compromise with a taxing entity, you may want to get the assistance of a lawyer or a firm familiar with IRS or state/local tax negotiations and the tax code. These people will know whether your tax liability is likely to be compromised, how best to approach the negotiations and which laws forms etc apply.

During the negotiations, you should try to work out a compromise for the amount of money you owe as well as a payment schedule you can meet. You also should try to have waived all or part of the interest and penalties that will have been accruing on the back taxes that created the lien.

An integral part of the settlement agreement you negotiate there should be a letter from the taxing entity to the credit bureaus recording the tax lien has been paid and satisfied.

IRS Liens

If the IRS has a lien in your credit report and on your property, it is important to review the possibility of an Offer in Compromise. The IRS tax code says that the IRS may compromise a tax liability.

An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed. Absent special circumstances, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement.

The IRS may accept an offer in compromise based on three grounds that doubt exists on whether the taxpayer could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection, a legitimate doubt exists that the assessed tax liability is correct or there is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC.

Settling and removing an IRS lien can give a tremendous boost to a credit score. Of course, working with the IRS requires a fair amount of paperwork, patience and persistence.

Public records generally contain the most severe form of negative information regarding an individual’s credit history and therefore have the greatest impact on pushing a credit score lower. It is possible to have a good credit score even with public records, the length of time since the public record was recorded will factor in as well as the amount of the debt recorded and the overall credit profile. Individuals that reestablish good credit records or maintain some good credit records while they endure the hardship of a public record may in fact have a fair to good credit score. It is always best to assess your whole financial picture; debts, assets and income before deciding which accounts to try and clear up and which method of clearing up these debts will work best for you. Sky Blue Credit Repairwill be able to assist with all of the above tasks.

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